Friday, March 30, 2007

Procuring Cause

Procuring Cause – The best kept secret most Realtors do not want you to know!
Be careful not to give up your right to choose your own Realtor who will represent ONLY you.
There has been an unspoken term in the real estate industry for many years that most home Buyers are never made aware of -- Procuring Cause. Also known in real estate circles as the Threshold Law.

Senario: You are just beginning to think about a new home. So you go out driving around one week end, just to get an idea of what is on the market. You find an Open House and decide to go in. You spend a lot of time looking through the house, asking the Real Estate Agent a lot of questions about the home and the neighborhood, revealing your excitement that this seems to be just the home you had envisioned.

You go home to think about it and decide you should have a Realtor who is working for you and your best interests. One who can advise you on price to offer and negotiate the price on your behalf. You find a buyer’s agent and tell them you wish to write an offer on this home. When your agent contacts the listing agent, they ask who your buyers are because some of the details sound like a couple she spoke with over the week end. Sure enough, she knows your name and intimate details of your situation.

The listing agent informs your Buyer’s Agent that she was in the home when you visited over the week end and that she is the Procuring Cause of the sale. She is fine with your agent writing the contract but because she was the procuring cause, she will not agree to pay your agent’s commission. Since Realtors earn their living from commissions, unless you agree to pay your agent outside the transaction, it is doubtful they would agree to represent you on this home.
You now have to make a decision. Do you want to use the agent representing the Seller only (you have no representation) or Dual Agency (the agent trying to represent both you and the seller) or walk away from the home altogether?

The morale of this story: don’t start looking at homes before you select an agent to represent you. Select an Exclusive Buyer’s Agent, who will never have a conflict of interest with Dual Agency. A Buyer’s agent who works for a listing company, could end up as a Dual Agent if you purchase one of their company’s listings.

2 comments:

charlton said...

Customer calls an agent and rides around looking. The agent has no written contract with the buyer.
Agent tours many properties with Customer. Agent did not write a contract on the property for the Customer.
At a later date, Customer contacts another agent and wants to look again. New agent has no written agreement with buyer but ends up closing on one of the houses that 1st agent showed the buyer. Question:
Is there a legal issue concerning procuring cause by the 1st agent, just because the first agent happened to ride the potential buyer by the purchased property?
CW

Jason B. Graves said...

CW,

Having no written contract with the first agent is a deathblow to that agent trying to collect a commission.

The second agent would have needed to sign an agency contract with the buyer prior to writing and negotiating a purchase contract.